AUSTRIA Law and Practice Contributed by: Oliver Völkel and Philipp Ley, CERHA HEMPEL
allowing more contractual flexibility). Depending on the lender’s size and portfolio, regulations on large credit exposures under the Banking Act may apply, imposing concentration limits and additional risk man - agement requirements. In summary, consumer loans face tighter supervision and stronger safeguards than commercial loans. 4.2 Underwriting Processes Underwriting processes in the industry vary but gener - ally include creditworthiness assessments, risk scor - ing, verification of borrower information and affordabil - ity checks. For consumer loans, these processes are heavily shaped by consumer protection laws which mandate thorough credit assessments and respon - sible lending. For commercial loans, underwriting is less prescrip - tive, giving lenders more discretion to design risk models and due diligence processes based on their internal policies and risk management. However, prudential regulations and internal risk management standards, especially for larger institutions, also influ - ence underwriting practices. The Austrian Central Bank (OeNB) has issued guide - lines on credit approval processes and credit risk management. These guidelines aim to assist finan - cial institutions in designing and implementing robust credit approval systems and may also influence the underwriting process. 4.3 Sources of Funds for Fiat Currency Loans Fintech lenders obtain fiat funding for loans through various methods. Each method has its own legal and regulatory implications. Peer-to-peer lending involves directly matching bor - rowers with investors through a digital platform. This model typically requires licensing and may fall under securities laws if the investment instruments offered to lenders qualify as securities. Platforms must also comply with consumer protection, AML/KYC and data privacy regulations. In addition, depending on the structure, peer-to-peer lending may qualify as credit brokerage under the Austrian Banking Act, which could trigger additional regulatory requirements.
Lender-raised capital refers to funds raised through equity or debt by the fintech itself. While lending by itself may not require a licence, raising capital can trigger securities law requirements, disclosure obli - gations and potentially, regulatory oversight around leverage or fund use, eg, raising capital via a subor - dinated loan by numerous private lenders qualifies as an investment ( Veranlagung ) under Austrian law and might require publication of a prospectus or so-called information sheet depending on the amount of money raised. Taking deposits as traditional banks do requires a banking licence. This route brings the strictest over - sight, including capital adequacy, liquidity require - ments and mandatory participation in deposit insur - ance schemes. It also subjects the company to intensive conduct and prudential supervision. Securitisation involves bundling and selling loans to investors as asset-backed securities. This method engages securities laws, requiring transparency, risk retention and often the use of separate legal entities to ensure legal separation of assets. Regulatory focus here is on investor protection. 4.4 Syndication of Fiat Currency Loans Syndication of fiat currency loans does take place in online lending, especially for larger loans or institu - tional lending platforms. Syndication may occur at origination (multiple lenders commit upfront) or post- origination (the loan is partially transferred or “partici - pated” out to others). When several credit institutions agree to jointly extend a loan, it is referred to as a syndicated loan. The forma - tion of the credit syndicate and the mutual rights and obligations of the participants are primarily shaped by contractual practice. Under Austrian civil law, a syndicated loan arrangement is typically classified as a civil law partnership ( Gesellschaft bürgerlichen Rechts ). This legal structure governs the internal rela - tionship between the syndicate members, including rights, obligations and liability, unless otherwise con - tractually modified. If the platform facilitates syndicated lending, it may be considered credit intermediation or credit brokerage
40 CHAMBERS.COM
Powered by FlippingBook